Banks

01/03/2013

The Partnership for Civil Justice Fund filed this request. The document – reproduced here in an easily searchable format
– shows a terrifying network of coordinated DHS, FBI, police, regional
fusion center, and private-sector activity so completely merged into one
another that the monstrous whole is, in fact, one entity: in some
cases, bearing a single name, the Domestic Security Alliance Council.
And it reveals this merged entity to have one centrally planned, locally
executed mission. The documents, in short, show the cops and DHS
working for and with banks to target, arrest, and politically disable
peaceful American citizens.

MALPRACTICE: Low
interest rates lead to a vast oversupply of houses. But instead of
letting prices fall to market clearing levels, the Fed lowered rates
even further and is now buying mortgage bonds as part of QE3.

RESULT: Mortgage rates
are at near-record lows and home building is rising again, even though
we still have too many houses (malinvestment), flipping is back (moral
hazard), first-time home buyers are being priced out of starter homes
(unintended consequence) and mortgage debt is beginning to rise again
(moral hazard). Important to understand is that owner occupied homes are not productive
assets. They eat capital and the more big houses we have the less
productive we are as a society (unintended consequence).

They were forced to buy equities and junk bonds to achieve decent yields.

Now the yields on those two classes have been lowered to the point
where they don’t work, so pension funds are moving back into
collateralized loan obligations (CLOs), securities created from pools of
corporate loans.

JP Morgan forecasts three times as many CLOs will be created this year as in 2011.

MALPRACTICE: The Fed’s willingness to monetize debt prevents the US from living within its means.

RESULT: Without a
printing press we would have to prioritize and limit spending. But with a
printing press we don’t. The US can run a global military empire and a
cradle to grave welfare state, and simply print the money it needs
(moral hazard).

10/01/2012

In July, the Fed chairman sent letters of gratitude
to five Democratic members of Congress after they delivered speeches on
the House floor urging fellow lawmakers to reject the “Audit the Fed”
bill authored by retiring Texas Republican Ron Paul, the central bank’s
chief antagonist.

Their efforts failed to defeat the bill, but they were not in vain, at least in Bernanke’s eyes.

“While the outcome of the vote was not in doubt, your willingness
to stand up for the independence of the Federal Reserve is greatly
appreciated,” Bernanke wrote in the letters, which were obtained by
POLITICO through a Freedom of Information Act request.

So who did Bernanke send those letters to?

According to Politico,
the thank you letters were delivered to U.S. Representatives Barney
Frank, Elijah Cummings, Melvin Watt, Carolyn Maloney and Steny Hoyer.

The Federal Reserve Bank of New York released documents that show it learned five years ago of big banks understating their borrowing costs to manipulate a key interest rate. The documents also show that Treasury Secretary Timothy Geithner, who was then president of the New York Fed, urged the Bank of England to make the rate-setting process more transparent.

The London interbank offered rate, or LIBOR, affects interest that people pay on trillions of dollars in loans around the world. Britain’s Barclays bank admitted two weeks ago that it had submitted false information to keep the rate low.

HSBC Holdings Plc (HSBA) will apologize at a July 17 U.S. Senate hearing for anti-money laundering controls that weren’t effective enough, according to an internal memo obtained by Bloomberg News.

“The real issue here is that the U.S. agencies have cited HSBC several times for being deficient at money-laundering practices as long ago as 2003,” Jim Antos, a Hong Kong-based analyst at Mizuho, said by telephone today. “Nine years later, the situation is apparently not yet under control.”

Over $800 trillion dollars worth of investments are pegged to the Libor rate. In other words, a market more than 10 times the size of the entire real world economy is effected by Libor.

Libor is determined by a daily poll that asks banks to estimate how much it would cost them to borrow from each other for different timeframes and in different currencies. Because banks’ submissions aren’t based on real trades, academics and lawyers say they are open to manipulation by traders. At least a dozen firms are being probed by regulators worldwide for colluding to rig the rate, the benchmark for $350 trillion of securities.

05/02/2012

The special inspector general for TARP, Christy L. Romero wrote the following to Congress:

After 3½ years, the Troubled Asset Relief Program (“TARP”) continues to be an active and significant part of the Government’s response to the financial crisis. It is a widely held misconception that TARP will make a profit. The most recent cost estimate for TARP is a loss of $60 billion. Taxpayers are still owed $118.5 billion (including $14 billion written off or otherwise lost).

04/19/2012

Five banks -- JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Citigroup Inc., Wells Fargo & Co. (WFC), and Goldman Sachs Group Inc. -- held $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to central bankers at the Federal Reserve.

Five years earlier, before the financial crisis, the largest banks’ assets amounted to 43 percent of U.S. output. The Big Five today are about twice as large as they were a decade ago relative to the economy, sparking concern that trouble at a major bank would rock the financial system and force the government to step in as it did in 2008 with the Fed-assisted rescue of Bear Stearns Cos. by JPMorgan and with Citigroup and Bank of America after the Lehman Brothers bankruptcy, the largest in U.S. history.

03/17/2012

Lawmakers allowed bank consolidation and market power in violation of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. That act specified that no single bank may hold more than 10 percent of total retail deposits. Unfortunately, since 1994 two limitations of Riegle- Neal became clear, (1) the growth of big banks was not fuelled by retail deposits but rather by various forms of “wholesale” financing, and (2) the cap was not enforced by lax regulators, so that Bank of America, JP Morgan Chase, and Wells Fargo all received waivers in recent years.

Then Congress had to repeal the Glass-Steagall Act of 1933, so that any financial institution can act as an investment bank, a commercial bank, and/or an insurance company. They hid this as the Financial Services Modernization Act of 1999.

To capitalize on insatiable greed, banks started marketing OTC derivatives (a.k.a. as swaps). For swaps, delivery places and dates, volume, technical specifications, and trading and credit procedures are subject to negotiation by the parties to the contracts. Swaps are traded on a bilateral basis not on a public exchange. The exposure is to default by the counterparty. Credit risk mitigation measures, such as regular mark-to-market and margining, are optional for swaps. Swaps have no regulatory oversight, they are simply goverened by the contractual relations between the parties.